Market Overview: Carrier Ethernet Exchanges

Interconnections have always been a key focus for data centers located in areas with high concentrations of network service providers. Some of these data center providers are now investing in specialized exchanges to support Carrier Ethernet services.

The Metro Ethernet Forum’s formal definition of an Ethernet Exchange, a form of an External Network-Network Interface (ENNI), is “an interconnect point among service providers where Carrier Ethernet Services are exchanged.” From an end user’s point of view, you want your service provider to supply this service so you can have a direct Ethernet connection from end-to-end.

End Users See Benefits of Ethernet

Today, most enterprises are still encapsulating their native Ethernet data into TDM/SONET/SDH then de-encapsulating it at the other end. However, more and more, end users are seeing the benefits of Ethernet Services and perhaps eventually, the entire public network may be running native Ethernet.

There are currently just a few vendors of Carrier Ethernet Exchange services: CENX, Equinix, Neutral Tandem and Telx.

CENX: Carrier Ethernet Neutral Exchange (CENX) was the first Carrier Ethernet Exchange. CENX has Carrier Ethernet Exchange services currently available in Chicago, Los Angeles, London, Miami, New Jersey, New York and Hong Kong. The system is resilient and supports high availability with Gigabit and 10-Gigabit Ethernet connections. MemberLink is a new service from CENX that allows customers to connect to any remote Ethernet Exchange through member companies.

Equinix: Most widely known for its co-location and managed services business, Equinix was an early entrant as a Carrier Ethernet Exchange as well. It has a global footprint on four continents: North America, South America, Europe, Asia and is not only servicing carriers, but has started to open its exchange to cloud companies.

Neutral Tandem: Its Carrier Ethernet Exchange was launched in early 2010. Since then, the company acquired Tinet and has made recent progress with its new EtherCloud offering. With this, Tinet can provide end-to-end international connectivity to any company. It allows global coverage using VPLS through Juniper equipment in the core and Cisco in the access.

Telx: While Telx is best known as a leading colocation provider, it was also at the forefront of Ethernet exchanges. Telx is a carrier-neutral data center colocation provider and has several facilities around North America which enables it to supply seamless Ethernet connection not only between carriers, but between any of its enterprise colo customers as well. Its Ethernet Exchange services have a range of options depending on customer’s needs. It charges by the port and can connect customers at 100 Mbps, Gigabit or 10G data rates through its Cisco ASR 9000 equipment. Telx expects to incorporate 40G as needed – probably not until 2012/2013 timeframe, though. No equipment is oversubscribed and low latency options are available for premiums.

While it is rather difficult to quantify this market, Ethernet exchanges services are expected to have around a 20-percent CAGR over the next five years starting at 100’s of millions of dollars in 2011. Plenty of revenue to support the few entrants that have decided to focus on it so far.

Interconnection and colocation specialist Telx today announced the debut of the Telx Ethernet Exchange, along with a partnership with Neutral Tandem, which is in the process of deploying a similar exchange. The companies will tie their offerings together with a Cisco-powered unified fabric. Read More

CENX has not pulled out of London or Hong Kong. Carrier Ethernet Exchanges are viable. Here is a response from Nan Chen, Co-founder and President of CENX - "Carrier Ethernet Exchange is not only viable, but thriving from CENX perspective. For example, we are swamped with Carrier Ethernet Exchange services, especially an application in mobile backhaul for 4G-LTE where we interconnect multiple cellsite access providers to multiple wireless operators in a given market, so that wireless operators could reach all cellsites via Ethernet.
On Europe, our data center partnership didn't deliver their commitment, that hindered our ability to execute... we are committed to Europe and evaluate our options.
We are committed to Asia, however, our asia pacific customers/members really want to connect CENX in LA, where majority of CENX members whom they want to connect to are in CENX LA Exchange."

I'd be interested to understand more about the statement from Nan Chen "On Europe, our data center partnership didn’t deliver their commitment, that hindered our ability to execute".
What commitment is required from a DC operator to make an Ethernet Exchange viable? If the exchange model is viable and set to grow as forecast, surely they should be able to execute their plans without support from DC operators. Or did the DC partner decide they would rather emulate the Equinix model and do it themselves?

I think that Mr. Chen's comments were about an agreement that was not upheld and had nothing to do with the fact that it happened to be for Ethernet Exchanges. Here is his reply to your question:
"It's quite simple actually, we had an agreement with an data center operator to allow us to deploy exchanges across Europe. However they didn't fulfill the terms in the agreement, but not because they want to do their own exchanges. As for actual terms they didn't fulfill, I cant disclose, governed by confidentiality."